A grueling part of the venture capital or private equity fundraising process is the due diligence phase. Potential investors will typically open up an investor data room, where the prospective company will provide as much data as they can to ensure investors that the business is a good investment.
This is why having accurate and granular data is important for growth-stage companies. Strong data can help you show you’re in control of growth levers. You can show where more “gasoline on the fire” will help you scale the business faster, or where hiring more people can help you accomplish strategic initiatives sooner.
So, what type of data are investors looking for?
How Data Helps Investors Evaluate Companies
Investors initially get excited about a prospective investment because of the historical performance of the company. So the due diligence process, these investors have two goals:
- They want to confirm the company’s historical performance with data
- They want to gain as much understanding of what future revenue growth might look like.
In order to achieve the second goal, they will use data to evaluate key components like market size, competitive differentiation, and particularly the current state of the go-to-market (GTM) engine and its capacity to support near-term growth goals.
Data that supports the GTM engine includes:
- Customer acquisition costs
- Pipeline performance
- Conversion rates in each part of the lead-to-deal process
- Sales cycle times
- Sales ramp times
- Sales ramp capacity
Investors make it very clear that data is integral to determining a company’s potential. And having a strong handle on that data will result in a high valuation, according to Arthur Nobel, Principal at Knight Capital.
The Risks of Having Missing GTM Data
What’s common—particularly for early stage and early growth-stage companies—is that they don’t invest in capturing go-to-market data at a level that is granular enough.
That missing detail impacts investors’ due diligence in two ways.
Lack of investor confidence in traction: Investors want to have confidence in their view of the company’s future. Without having the data to show accurate traction, it puts the investor in a position where they’re more speculative than they're probably comfortable with.
GTM engine seen as unfocused and imprecise: Missing or inaccurate data is seen as a sign that the company’s revenue engine is not as mature as desired, because the revenue leaders aren't managing with the level of precision that they could be.
Both of these issues add risk in the investors’ eyes. The higher the perceived risk, the lower the investors are going to be willing to invest.
If they start conducting due diligence and the data messy or non-existent, it’s not uncommon for investors to reassess the company’s valuation, or even worse, walk away from a deal.
What Go-to-Market Data to Is Important to Track?
The primary goal of the company is growth, either in revenue or profitability. If you achieve that goal, the financing will inevitably come.
With that said, the company mindset needs to be not “what data do we need to have to get our financing done?” but “what data do we need to have to inform us in order to maximize our growth?”
For early-stage companies, that data means nailing your product market message fit. That means fully focusing on capturing data that helps them understand who your ideal customer profile is, and how they think about your product/service.
(Pro tip: Use conversation intelligence tools and configure those tools with granular trackers. You’ll then know when certain phrases or sentiments are shared by prospects. Configure it correctly and you’ll gain valuable insight on prospect profiles, challenges, competitive dynamics, and the like.)
As companies evolve to raise later rounds of funding, it becomes critically important to optimize your strategies, processes, and people. Being able to finely tune all of these areas drives maximum efficiency and effectiveness in new customer acquisition.
(Pro tip: A layered data infrastructure that precisely measures your strategies, processes, and people will allow your leadership teams to manage the environment with a lot more precision.)
Knowing precisely which levers to pull not only saves your team a lot of headaches, it keeps your sales and marketing teams laser-focused on growing the business.
Ultimately, an intimate understanding of your go-to-market data will push your go-to-market process forward. In that way, your data helps you gain a competitive advantage in the market—which investors value very highly.